October 26 (SeeNews) - Romania's consolidated budget deficit increased to 0.81% of the projected 2017 gross domestic product (GDP) in the nine months through September, from 0.49% a year earlier, the finance ministry said.
The budget gap widened to 6.8 billion lei ($1.74 billion/1.48 billion euro) in the January-September period, compared to a 3.7 billion lei shortfall in the same period last year, the ministry said in a statement late on Wednesday.
Consolidated budget revenue rose 8.8% on the year to 180.4 billion lei, while spending increased 10.5% to 187.3 billion lei during the nine months through September 2017, mainly due to salary hikes in the public sector.
Tax revenue increased 9.1% on the year and social security contributions grew 16.1%, while VAT proceeds fell 0.3% on the year in the January-September period. The drop reflected a VAT cut from 20% to 19%, in effect from January.
Investments totalled 12.1 billion lei in the first nine months of the year, or 1.4% of GDP, compared to 17.3 billion lei, or 2.3% of GDP, in the same period of 2016.
Romania targets a consolidated budget gap equivalent to 2.96% of GDP on a cash basis in 2017, just below the EU's 3% ceiling. According to the EU's Maastricht treaty signed in 1992, the ratio of the annual general government deficit relative to GDP at market prices must not exceed 3% at the end of the preceding fiscal year.
Romania's consolidated budget showed a deficit equivalent to 2.41% of GDP last year, compared to a shortfall of 10.3 billion lei, or 1.47% of GDP in 2015.
Earlier on Wednesday, the finance ministry released a statement saying that Romania will meet its budget deficit target for 2017. The statement was prompted by data from the European Office of Statistics, Eurostat, showing that the country had a budget gap of 4.1% in the second quarter.
"The deficit target of 2.96% of the annual GDP set for 2017 is not at risk. The difference between the balances mentioned by Eurostat and the monthly data published on our website stem both from the calculation methodology, namely the European System of Accounts (ESA) using the accrual method and from the impact generated by the calculation methodology of seasonally adjusted quarterly deficits," the ministry said, adding that its data showed that Romania's consolidated budget deficit stood at 0.96% of GDP in the second quarter of the year.
At the beginning of October, the International Monetary Fund (IMF) said that Romania's current account deficit is expected to decrease to 2.9% of GDP in 2018 from 3% of GDP projected for 2017.
Also in October, ratings agency Standard&Poor's said that Romania's budget and trade deficits will widen due to the consumption-focused growth.
In July, Fitch Ratings too warned on a growing budget deficit and economy overheating. "Romania is at risk of re-entering the EU Excessive Deficit Procedure this year, having only exited it in 2013," the rating agency warned.
The earliest warning came in May from the European Commission, which said Romania might not meet its budget deficit target in 2017 and urged the government to take action to avoid the opening of an excessive deficit procedure.
(1 euro=4.5976 lei)